MANILA – Fitch Solutions announced on Wednesday that it had revised upward its economic forecast for 2021 for the Philippines to 4.5% from 4.2%.
This was after the country’s gross domestic product (GDP) grew 7.1% in the third quarter, beating expectations. On a quarterly, seasonally adjusted basis, GDP grew 3.8% during the period.
“At Fitch Solutions, we now forecast the Philippine economy to grow 4.5% in 2021 and 6.5% in 2022, revised from 4.2% and 6.8% respectively,” Fitch Solutions said in a statement.
“The recovery in domestic activity will be the main driver for the future of the economy; however, low vaccination rates and less favorable external conditions keep growth risks down,” he said. added.
For 2022, the forecast of controlled economic growth is 6.5% against 6.8% previously, he said.
A late recovery in the tourism sector, air traffic still only 25 percent and a lack of tourists are among the headwinds for growth next year.
But there are signs of a continued recovery in the fourth quarter of this year, with an expected increase in national activity as the government’s vaccination campaign accelerates, Fitch Solutions said.
The government estimates that growth this year will be between 4 and 5 percent. Socio-Economic Planning Secretary Karl Chua said earlier that the economy could return to its pre-pandemic level in 2022.
Fitch Solutions noted, however, that the country remains vulnerable to COVID-19 outbreaks due to disparities in regional vaccine deployment as well as lower efficacy rates of administered vaccines.
As of November 9, only 39% of the government’s goal of 77.1 million had been fully immunized.
Sinovac from China makes up the bulk of vaccines arriving in the country, whether purchased or donated. Using vaccines with less efficacy means there is a greater need for booster vaccines, Fitch Solutions said.
“Thus, in the short term, further disruptions could weigh on the pace of economic recovery, and the prospects for a recovery of the country’s economy.
tourism sector remain weak, ”he said.
“NORMALIZING” MONETARY POLICY
Fitch Solutions said it expects the Bangko Sentral ng Pilipinas to normalize its monetary policy by raising the key interest rate by 75 basis points in 2022.
The BSP has kept the country’s overnight borrowing rate at its lowest level of 2% in about a year now. It has 2 monetary policy meetings remaining for the rest of the year.
BSP Governor Benjamin Diokno said earlier that a tightening of monetary policy was unlikely for the rest of the year.
Fitch Solutions, Economic Recovery, GDP, GDP Growth, COVID-19 Pandemic, Domestic Activity, Tourism